RENEWABLE ENERGY:

Britain facing long, hard slog to 2020 targets

Beset by an outdated grid, escalating costs and delays at massive offshore wind farms, and a domestic biofuels industry priced out by U.S. imports, the United Kingdom will struggle toward its 2020 renewable energy targets.

Old coal, gas and nuclear power plants generating a quarter of the country's energy will need to be shut by 2020, so massive investments are needed to secure both conventional and renewable supplies. And the credit crisis could not have come at a worse time.

Without state intervention, there will not be enough credit for long-term green power projects, Adair Turner, the chairman of the United Kingdom's Financial Services Authority, warned recently.

"Would I be confident today that without policy interventions the supply of long-term project finance would be sufficient over the next few years to drive us forward? No, I wouldn't," Turner, who is also the British government's climate change adviser, told the British Parliament's environmental audit committee last month. "We will have to see if there are elements of public policy which might be required specifically to support long-term project finance."

E.U. targets require Britain to get 15 percent of its energy from renewable sources by 2020. In 2006, the figure stood at just 1.5 percent. When it comes to electricity production alone, Britain has set itself a more ambitious target: 35 percent should come from renewables by 2020. Increasing it to that level from the current 4 percent will cost an estimated £100 billion.

But giant utilities EDF of France and E.ON of Germany argue that trying to reach a 35 percent green electricity threshold is not only unrealistic but also damaging to other sources of energy, such as nuclear plants.

"The deployment of high levels of intermittent renewables for electricity generation will require the construction of additional carbon-emitting plants as back-up for when renewables are not available to meet demand," EDF wrote recently in a document filed with the government. "This is likely to be predominantly gas-fired and will therefore undermine efforts to reduce dependence on non-domestic fuel sources."

EDF added that Britain should aim to get 25 percent of its electricity from renewables by 2020 and also invest in new nuclear power, as well as coal and gas with carbon capture and storage. The argument has infuriated environmental groups.

"Both EDF and E.ON have a vested interest in rubbishing renewables," said Jim Footner, a senior energy campaigner at Greenpeace U.K. "Too much effort on renewables would damage the business case for new nuclear plants, which EDF wants to build, and would reduce the argument for a new coal plant that E.ON wants."

Favorable offshore wind conditions

Some estimates show the United Kingdom needs to increase its wind power output tenfold, to 30 gigawatts, to reach its renewables target. Theoretically, it is possible.

Britain's coastal waters have space for up to 7,000 more wind turbines than are already planned, according to an environmental impact study -- enough to supply almost every home in Britain with electricity.

But EDF and E.ON point out that in January some of the existing wind farms operated at 10 percent of capacity. Footner agreed that Britain is far from exploiting its full wind energy potential.

"To deliver offshore wind, you need to remove planning obstructions and improve the incentive mechanism, which now only exists for onshore wind," Footner said. "We also need incentives to get a manufacturing supply chain going. We are way behind Germany and Denmark in wind now."

The seas surrounding the United Kingdom offer some of the best wind conditions for offshore turbines, but several giant wind power projects remain in limbo.

A perfect example is the London Array -- a 1,000-megawatt behemoth that could power 750,000 homes and would become the world's largest offshore wind farm if built. But some calculations show that the power produced here could cost more per megawatt than that from a nuclear plant. The project is reeling after Royal Dutch Shell PLC pulled out. Abu Dhabi's renewable energy fund, Masdar, joined E.ON and Denmark's DONG Energy to push it forward.

But offshore wind power generation currently costs 50 percent to 100 percent more than onshore wind power, according to a report by the French consultancy and services company Capgemini. And the price tag of £3 billion for London Array's 341 turbines is giving Masdar second thoughts. The fund's director of innovation and investment said at a conference this year that the economics of the project need to be revisited. With Masdar on the fence, E.ON and DONG have also not yet made any commitments to invest money in the London Array.

Around the country, 262 different projects totaling 7,000 megawatts are stuck in the planning stages despite government promises to speed up things, according to the British Wind Energy Association.

It takes an average of 15 to 20 months in England to win a permit, and far longer in Scotland and Northern Ireland, where the bulk of the wind farms are being developed. In one extreme case, an Ecotricity wind farm application submitted in 2001 is still mired in a court battle with two local residents complaining about potential noise problems.

Grid woes

Besides regulatory delays and huge costs, wind energy also has to grapple with an outdated electricity grid. Much of the United Kingdom's national grid was built in the 1950s and 1960s. It is inadequate not only for wind power, but even for the 2012 Olympics.

Connections for new real estate developments related to the games have not been made yet, and the government's proposals on how to improve the grid for the future are not due until April.

"They need to fix the grid connection issues," Footner said. "Who's going to pay for connections, and what's the queuing system? There needs to be priority access for wind farms."

To accommodate up to 35 gigawatts of new renewable energy and up to 10 gigawatts of new nuclear generation coming on line by 2020, the grid will need up to 1,000 kilometers of new cables upgrades worth up to £4.7 billion, according to a study by the Electricity Networks Strategy Group. The study warns that work needs to start immediately, including laying subsea cable links between Scotland and England.

The antiquated grid is also an obstacle to Britain's fulfilling its potential as one of the world's biggest sources of wave and tidal energy.

"Access to connections into the grid is critical for tidal generation," said Sean Sutcliffe, chairman of Tidal Generation Ltd., a company developing a 1-megawatt, fully submerged tidal turbine with Rolls-Royce Corp. "As it is now, the grid is configured for coal and gas, which come from different parts of the country than renewables."

Tidal generation is also plagued by fighting over a plan to produce 7 percent of Britain's electricity using the technology in the Severn estuary, which has the second highest tidal range in the world. Initial calculations showed that the plant would cost £14 billion and would permanently flood 100 miles of coastline, but competing technology providers argue over the accuracy of that estimate and whether more power could be produced with less flooding.

Tariffs give hope to U.K. biofuel producers

One area in which at first look Britain seems ahead of green targets is biofuels.

The country has met its goal of getting 2.5 percent of motor fuel from renewable resources this year, but it is mostly because of imports from the United States. British biofuels account for 7 percent of the total used in the country.

"A lot of producers in Europe have shut down in the last couple of years," said Sutcliffe, who is also chairman of Biofuels Corp., which operates Britain's largest biodiesel plant. It is running well below capacity on used cooking oils instead of European rapeseed oil. "The primary reason has been U.S. producers. They're able to sell [biodiesel] below our production cost. The tariffs are a good step that should give a more level playing field," he said.

The European Union has imposed anti-dumping and anti-subsidy tariffs on U.S. biodiesel totaling between €234.80 and €472.10 per ton.

"It's early days, but we've gotten our cost base down to survive, and now we're pretty lean and mean and able to raise production over the next couple of quarters," Sutcliffe said. But he added that his company was still focused on short-term survival and not yet on 2020 targets, which he believed would still require subsidies.

"The impact and evidence of climate change are increasingly clear, so that should mean that government and public support for technologies like biofuels should continue to grow," he said.

North Sea gas running out

While trying to figure out how to markedly increase its renewable energy output, Britain also faces the closure of about 25,000 megawatts of aging coal, oil and nuclear plants by 2015 and a rapidly dwindling supply of natural gas from its sector of the North Sea. Currently, about 40 percent of U.K. electricity and 80 percent of heating comes from gas. By 2015, 80 percent of the gas consumed in Britain will be imported.

To prepare for this, Britain is reviving its nuclear industry, plans to open up to 200 miles on its coastline for new gas storage and liquefied natural gas import terminals, and hopes carbon capture and storage, or CCS, technology will allow it to build new coal-fired plants.

A study from the Advisory Committee on Carbon Abatement Technologies said Britain could get 10 percent of its power from CCS-equipped plants by 2020 if the government introduced a guaranteed floor price for carbon for the first 2,000 MW with CCS facilities.

In December, Britain pushed for and obtained an increase in E.U. funding to support CCS technology. The European Union plans to spend about €6 billion on 10 to 12 demonstration projects by 2015 to kick start the industry.

But environmentalists criticize the United Kingdom's push for CCS as an unnecessary distraction from promoting renewable energy.

"To hope that CCS is available later is not appropriate," Footner said. "We have 100 months to stabilize emissions. If we start building coal plants without a deadline to close them back or fit them with CCS to take 90 percent of their carbon emissions, we are faced with a catastrophe, because we're locking ourselves in a carbon-intensive future."